Whither Roth?

I've on and off wondered how "safe" Roth accounts and things like this
anti-Roth screed in the LATimes:

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and this blog post:

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talking about the sad fiscal shape of the US has me wondering again.
While I don't think that Congress will be able to get away with
directly taxing qualified Roth withdrawals, I've more and more thought
that we're going to end up seeing stuff like qualified Roth
withdrawals being included in the taxability-of-SS-benefits
calculation or becoming an AMT preference item or maybe even the
repealed-in-1997 excess accumulation tax on IRAs returning and
applying to Roth IRA distributions in excess of some amount.
Now, certainly if your trad IRA contribution is going to be
non-deductible then making a Roth contribution (or tIRA contribution
followed by immediate conversion if your income doesn't allow the full
Roth contribution) is pretty much a no-brainer.
But in other cases, especially if you are in the 25% federal bracket
or higher, what do you think? Better to at least get the certain bird
in hand (the current-year tax deduction)? Or pay the taxes now
figuring rates will be higher later but that the fisc won't be so bad
that Rothees will be screwed by stuff like above? Where do you see it
Reply to
Rich Carreiro
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I read the first article. I don't agree that the Roth should be eliminated, as the author suggests. As far as building a dynasty is concerned, the Roth is part of one's estate, and subject to whatever the estate tax at the time of one's death. RMDs take effect for the beneficiary. No matter what the rules are, there will be those who don't care for them. Others would like no limit to long term savings plans. Many cite that the rich are taking advantage of these plans (duh) and would like to tax the rich more regardless of any thing else.
I think there's a risk that Roth withdrawals, like SS payments are part of the cascade of phaseouts. e.g. the Roth withdrawal counts as the trigger to tax SS, even though the Roth isn't taxed, per se.
The choice to Roth is clearly individual. The general statement, good for a large part of the bell curve is that income at 25% or higher should be pretax, not Roth. If one is at 15% but has little saved and little they are saving now, pretax 'can' make sense. I'm fond of doing the math and showing how much wealth it takes to put a retiree in the 10% and then 15% bracket based on the withdrawals. You are correct that if above the IRA deductability limit, Roth is no-brainer. And in the case of an 80+ yr old I know, converting to Roth to just top her 15% bracket each year seems the way to go, both to keep her RMDs from putting her into the 25% bracket and to spare her kids the tax at their marginal rates on her passing.
Reply to
On Tue, 12 Apr 2011 07:44:57 CST, Rich Carreiro wrote:
I think (and have always thought) that there is reason for concern. Since I don't know what will happen (except that the tax code is a fluid thing) my approach is to have some Roth and some traditional - but not to go overboard (lump sum conversions) with Roth.
Reply to
HW "Skip" Weldon
As usual, I agree with Skip. And the reason is easy to see. With a traditional IRA, I realize the benefit now. If some time down the road, Congress takes the benefit away (not sure how - just go with it), at least I realized some benefit in the interim. On the other hand, with a Roth IRA, I won't realize the benefit for 30 years. If Congress changes the rules, I'll never realize the benefit.
A bird in the hand...
Reply to
Bill Woessner

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